Profitability & Program Expenses
There is no doubt that expense management has become critical in managing overall credit union performance. Quality loans are difficult to find, price competition for all our products and services is unbelievable and regulatory assessments keep lurching at us like zombies in a bad horror movie (but at least in most zombie movies they can be outrun!). In this market, then, it is inevitable that we all must look to expense management as a critical element of long term strategic planning. Institutions which develop and maintain strong product level profitability measurement systems will be the survivors, and critical to that is gaining accurate and actionable expense information for each and every product.
In our many years in the industry, and analysis of hundreds of credit card programs, we often find that too few issuers have an accurate picture of their credit card program costs. With functions for many products blended together, some processing services outsourced, and ambiguity about what is overhead and how to account for it determining credit card program costs is indeed a tricky exercise. But knowing your expenses is critical; ignorance is the opposite of bliss.
In our work with issuers, we see some common errors in measuring credit card program profitability. These often include:
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